Owners hang for-sale sign on iconic Vancouver Hudson's Bay store

The Hudson’s Bay Co. has hung a for-sale sign on its huge, heritage-designated downtown Vancouver store in a transaction that could go down as one of the biggest commercial real-estate deals in the city’s history, according to one observer.

Hudson’s Bay, with its partner in ownership of the property, on Monday confirmed reports that they had hired commercial realtor CBRE and Brookfield Financial Real Estate Group to advise them on a potential sale.

This step comes less than a week after Hudson’s Bay reported the $1-billion deal to sell its landmark Lord and Taylor store in New York.

The Hudson’s Bay store would still occupy space in the building under a long-term lease, but the deal would return cash to the property’s owners, which is now officially a joint-venture between Hudson’s Bay and Canadian real-estate investment trust RioCan.

Although Hudson’s Bay and RioCan haven’t made a commitment to sell, a deal would be “one of the largest real estate transactions in Vancouver’s history,” according to James Smerdon, vice-president and director of retail consulting at commercial realtors Colliers.

“It’s a big deal,” Smerdon said. “It’s a big deal in every sense.”

In a media release, Hudson’s Bay CEO Richard Baker said the owners are “exploring the sale of this flagship property as the Vancouver real estate market has appreciated significantly over the past several years.”

The deal does give Hudson’s Bay another way to capitalize on the value of its real estate assets in tumultuous times for the Canadian retail sector, and the retailer has faced pressure from activist investor Jonathan Litt to generate more value for shareholders.

The first step for Hudson’s Bay and RioCan, however, will be to secure a $200-million loan by way of a four-year mortgage on the Vancouver property, with the cash to be distributed to the sellers based on their ownership share in the venture.

Hudson’s Bay already agreed to lease out upper floors in the Vancouver store as part of the complicated $1-billion deal to sell the Lord and Taylor store to the commercial-real-estate-firm WeWork, which Smerdon characterized as a smart move.

“The Bay has struggled to pull shoppers up to the top floors of their downtown stores for decades,” Smerdon said. “I see the WeWork deal as being a very positive way to get some value from the upper floors, but also to add a different use — offices, which generally don’t discount the value of upper floors like retailers do.”

The store’s status as an historical landmark — it has an ‘A’ classification on the City of Vancouver’s heritage registry — means that redevelopment options for any buyer would be limited.

“That means the exterior is protected from demolition and significant alteration,” said local historian and heritage expert John Atkin.

Since Hudson’s Bay plans to lease back space for its continuing retail operations, Atkin doesn’t expect any major changes to the building in the short-term.

“Any proposed changes would have a few hurdles to jump,” Atkin said in an email exchange.

As for its value, B.C. Assessment assessed the property at 647 Granville for just under $60 million for its 2017 assessment, although Smerdon said the value of long-term leases to the store and WeWork wouldn’t be accounted for in that estimate.

The Globe and Mail reported that the Vancouver building’s value on the market could be between $800 million and $900 million, an amount that hasn’t been confirmed.

In 2015, the Hudson’s Bay formed a joint venture with RioCan, with The Bay holding 88.1-per-cent of the venture and RioCan 11.9 per cent, to hold the real estate for 10 of its prime store locations, including Vancouver, Calgary, Ottawa and Montreal.

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